Recycling Wastewater Becoming More Important to U.S. Unconventional Oil and Gas Production

Recycling wastewater for reuse in unconventional oil and gas production is becoming an increasingly important component of U.S. exploration and production (E&P) strategies and has the ability to significantly mitigate costs for operators in areas with constrained freshwater availability or disposal capacity, according to a new research report from IHS Inc.

The new report, “The Future of Water in Unconventionals: Water Management Strategies,” is the second of two reports produced in conjunction with CAP Resources, a Houston-based consultancy. It examines water management strategies across 13 high-activity unconventional oil and gas plays in the continental U.S. (excluding California) and covers the entire water management value chain — acquisition, storage, transfer, hauling, treatment and waste-disposal services.

Freshwater availability and underground injection capacity for the disposal of wastewater are the two most important drivers of water recycling, the report says. Operating in areas that are constrained in these capabilities can more than double the capital costs and triple the operating costs of a well. Additionally, an inability to source freshwater can lead to drilling and completion delays or revenue impacts if wells are completed with insufficient water.

IHS expects the percentage of fracture fluids volume made up by recycled wastewater to double over a 10-year period. The report shows that, for areas where water availability and injection capacity are constrained, recycling wastewater can reduce capital costs and operating costs by 23 percent and 38 percent per well, respectively. Unlike most other water services, which are expected to increase moderately over the next 10 years, water treatment prices are expected to decrease. This increases the potential of recycling to mitigate other costs associated with production.

The report emphasizes the importance of understanding the hyper-regional balance of water availability, wastewater production and disposal capacity when developing water management strategies for a given area. Total water use for oil and gas development is equal to just 0.2 percent of annual water use that goes into U.S. agriculture and there is a surplus of injection capacity at the national level. But these factors vary greatly region to region.

Regulations governing water acquisition and injection procedures can significantly impact the market dynamics for production areas, the study says. Some states are creating new incentives to encourage water reuse, such as encouraging the use of large, multi-well pits to store wastewater for reuse (Colorado), centralized aggregation of wastewater in reuse operations (Oklahoma) or by allowing operators to reuse fluid without a permit if it is reused on their lease or transferred to another operator for use on theirs (Texas). Conversely, strict or outdated regulations can adversely impact E&P operations by inhibiting recycling and increasing the consumption of freshwater, the report says.

The report also says that further innovation in fracturing fluid chemistry could reduce water demand through low-water and waterless facture fluids. Developments in energized foam and gelled liquid petroleum gas (LPG) have the potential to reduce water demand and increase well productivity, but currently face significantly higher costs and added operational complexity compared to established, water-based fracturing technologies.